Firms lose turf in open market

HA NOI — Businesses were losing market share to foreign firms in the move to an open market system under the World Trade Organisation, industry leaders said.

They called for more assistance from the State so local associations and industries could develop in preparation for even more fierce competition to come as Viet Nam opened up all sectors.

Many of the firms were struggling to survive.

Sai Gon Garment Co 3's general director Pham Xuan Hong, who is also vice chairman of Viet Nam Textile and Apparel Association (Vitas), said one answer was to minimise reliance on imported raw materials which was causing the high retail price of locally made products.

Manufacturers needed to develop local raw material sources to cut costs, he said. For example, the garment sector imported 90 per cent of its cotton and 70 per cent of its fibre.

Hong said Vitas had encouraged its affiliated companies to seek partners in the domestic market and well-known companies to expand their markets.

Initiative and effort from business were necessary, however, and support from the State was needed to assist local businesses to reclaim their home turf, he said.

But while the sale of imported fake and poor-quality goods was rampant at markets and shops, domestic businesses would continue to face difficulties.

Foreign retailers had advantages of finance, infrastructure and experience, and they could afford to suffer losses for several years to gain a foothold in Viet Nam. Vietnamese businesses needed to enhance their professionalism, train staff and employ talented people, he said.

Another example was the local freight market, around 70 per cent of which is dominated by foreign businesses.

The industry was previously protected by the State but after the country was admitted to the WTO, foreign freight and cargo companies arrived and now number at least 30.

Of the more than 800 Vietnamese freight and cargo companies, most are small, with charter capital of below VND1.5 billion (US$71,400) and poorly skilled staff.

SGN Logistics Co's director general Ta Thi My Linh said freight fees in Viet Nam now accounted for 20-25 per cent of GDP, higher than many countries in the region and the world. This reduced the competitiveness of local companies.

In the next two years, the country would completely open its doors in the freight sector which would place the domestic logistic industry under an even greater threat of losing ground to foreign players.

Economist Ngyen Minh Phong said competition with foreign businesses was unfair due to high local interest rates and insufficient support policies, making the Vietnamese businesses poor at generating added value and increasing income for employees.

Phong said that when the market economy fully developed, domestic businesses would have better conditions but they would have to prepare strategies and plan methodically.

Viet Nam Marketing and Management Institute director Nguyen Trung Thang said that once Viet Nam opened all sectors in its commitment to the WTO, the competition would become even more fierce. Therefore, the State should focus on assisting associations and industries to develop. — VNS